Curbing money laundering

ByYNJanuary 14, 1986

IT is appropriate that the conservative Republican Reagan administration -- known for its firm advocacy of the American free-enterprise system -- is stepping up its war on white-collar crime. An administration that is a firm proponent of corporate America should be equally vigilant in thwarting legal abuses by corporate America. These abuses have been evident in the enormous cost overruns and financial improprieties brought to light during the administration's costly defense buildup.

Some critics of the administration -- Democrats and civil libertarians -- contend that the White House and US Justice Department have failed to prosecute top officials of corporations engaged in wrongdoing. Moreover, the administration's methods in going after criminals -- whether white-collar criminals or persons participating in organized crime -- have sometimes been overzealous or suspect.

Such complaints have their merits. But equally clear is that the Justice Department has been netting some big fish in the white-collar crime area.

In past months the department has gained notable convictions: Jake Butcher, for bank fraud; Paul Thayer, a former deputy secretary of defense, and Billy Bob Harris, for insider trading; J. David Dominelli, for mail fraud. It has won decisions against major US corporations: GTE Government Systems Corporation and E. F. Hutton &amp; Co. And it has directly targeted financial institutions that engage in, or are believed to engage in, money laundering.

Efforts to curb money laundering -- the funneling of money obtained from criminal activities, usually from cash and bills, into hard-to-trace deposits or financial accounts -- are absolutely essential and long overdue if there is to be a meaningful assault on organized crime. Currently, federal prosecutors are aided in their efforts by looking for violations of the Bank Secrecy Act. The act requires that banks must record and report cash transactions of more than $10,000.

More-comprehensive money laundering legislation is needed, however. Under current law, transactions involving the laundering of dirty money are not themselves crimes. The Justice Department and the US Treasury are pushing a proposal that would make it a federal offense to engage in the laundering of money obtained from illegal activities.

The proposal, now before Senate and House committees, has run into strong opposition from civil libertarians, who maintain that the measure, as now drafted, could threaten the confidentiality of the banking records of ordinary Americans.

Such concerns ought not be taken lightly. Americans are properly dedicated to the protection of their civil liberties. One element of the legislation criticized by civil libertarians, for example, would base wrongdoing in such a transaction on ``reckless disregard'' as well as on ``actual knowledge'' of wrongdoing. It is important that current law not be altered so as to endanger the rights of American citizens.

At the same time, the Justice Department has a strong case in arguing that specific legislation is needed to bar money laundering. We would hope that a compromise might be worked out among Congress, the Justice Department, and financial institutions that, while taking account of the need to maintain proper regard for civil liberties, also throws the gauntlet down against money laundering transactions.